Minnesota Senate offers own tax relief measure

As many as 500,000 Minnesotans could receive new tax breaks next month under a bill that started zipping through the Senate on Wednesday.

Leaders of the Senate Democratic-Farmer-Labor majority formally unveiled their $403 million tax cut plan in the morning and planned to speed it through a committee and possibly a floor vote by early Thursday afternoon.

The DFL-controlled House conceivably could pass it later Thursday, but House Speaker Paul Thissen, DFL-Minneapolis, said House members want to see the details of the Senate plan before deciding whether to give it an up-or-down vote. The Senate proposal provides $69 million less in tax cuts than the House version passed earlier this month.

For taxpayers, what's at stake is more than $200 million in income tax breaks for individuals and another $200 million-plus in sales tax reductions for businesses.

Senate leaders fast-tracked the tax bill a day after DFL Gov. Mark Dayton chastised lawmakers in the House and Senate for dragging their feet on tax relief.

Revenue Commissioner Myron Frans said time is critical because the state tax processors must take several steps to make sure taxpayers can file accurate tax returns and qualify for the new benefits before the April 15 filing deadline.

The department needs time to incorporate the changes before an expected surge in returns early next month. He expects 1.1 million Minnesotans -- 41 percent of all state taxpayers -- to submit their tax forms between April 1 and April 15.

Frans estimated between 300,000 and 500,000 taxpayers would be eligible for one or more of the new tax credits.

"We will work day and night, 24/7, to implement these changes once we get the law," he said.

Senate Tax Committee Chairman Rod Skoe, DFL-Clearbrook, said his bill generally lines up with House legislation on the "big issues": providing income tax cuts to individuals by matching state law to changes in the federal tax code and repealing three business-to-business sales taxes that Gov. Mark Dayton and the DFL-run Legislature enacted last year.

The Senate tax bill is smaller than the House measure mainly because the upper chamber delays a business sales tax exemption on capital equipment purchases from taking effect until mid-2015, generating $64 million in additional tax revenue.

Both bills would make more than 50,000 low-income families eligible for larger benefits under the Working Family Credit designed provide work incentives. More than 280,000 students would qualify for new student loan deductions.

For businesses, both proposals prevent a sales tax on warehousing services from taking effect April 1, as scheduled. Both repeal sales taxes on commercial equipment repairs and telecommunications equipment starting April 1, but unlike the House bill, the Senate version does not provide refunds for taxes already paid.

The tax cuts were made possible by a growing economy that is producing a $1.2 billion budget surplus. Last year, Dayton and DFL lawmakers passed a $2.1 billion tax increase to erase a projected deficit.

Senate Republicans said DFLers should give the entire surplus back, not just $434 million.

"We would like to know, and we think most Minnesotans would like to know, where's the rest?" Sen. Julianne Ortman, R-Chanhassen, said.

Senate Republicans proposed cutting the state sales tax by half a cent -- from the current 6.875 percent to 6.375 percent. That would save taxpayers an estimated $362 million next year.

"This is taxpayers' money that we think is best used by taxpayers," said Senate Minority Leader David Hann, R-Eden Prairie.

The Senate DFL bill would deposit $150 million of the surplus into a rainy-day budget reserve.

"We are in the best financial shape that we have been in since 1999," Skoe said. Lawmakers gave surpluses back to taxpayers for the next two years, and then spent a decade coping with budget deficits.

"We don't want to go through that again, so I think a little caution is in order," he said.